Slater Steels Corp. v. U.S.

Decision Date08 March 2004
Docket NumberSLIP OP. 04-22.,Court No. 02-00551.
Citation316 F.Supp.2d 1368
PartiesSLATER STEELS CORPORATION, et al., Plaintiffs, v. UNITED STATES, Defendant. VIRAJ GROUP, Plaintiff, v. United States of America, Defendants, and Slater Steels Corporation, et al., Defendants-Intervenor.
CourtU.S. Court of International Trade

Peter D. Keisler, Assistant Attorney General, United States Department of Justice, (David M. Cohen), Director, Commercial Litigation Branch, Civil Division, Jeanne E. Davidson, Deputy Director, (Thomas B. Fatouros), Trial Attorney; Christine J. Sohar, Office of the Chief Counsel for Import Administration, United States Department of Commerce, for Defendant.

Miller & Chevalier Chartered, (Peter Koenig), for Plaintiff Viraj Group.

OPINION AND ORDER

BARZILAY, Judge.

I. INTRODUCTION

The United States Department of Commerce ("Commerce" or "government") timely filed the Final Results of Redetermination Pursuant to Court Remand ("Remand Results"), pursuant to the remand order of the court in Slater Steels Corporation v. United States, 27 CIT ___, 279 F.Supp.2d 1370 (2003) ("Slater I"), the familiarity with which is presumed. The sole issue in this consolidated action (as it was in Slater I) is Commerce's "collapsing" of three companies of the Viraj Group, an Indian competitor, pursuant to 19 C.F.R. § 351.401(f) (2000) ("collapsing regulation").

The Viraj Group companies implicated in collapsing are Viraj Alloys, Ltd. ("VAL"), Viraj Impoexpo, Ltd. ("VIL"), and Viraj Forgings, Ltd. ("VFL"). "Collapsing" involves treating a group of affiliated producers as a single entity for the calculation of dumping margins.1

Plaintiffs and Defendants-Intervenor Slater Steels Corporation, Carpenter Technology Corporation, Electralloy Corporation, and Crucible Specialty Metals Division of Crucible Materials Corporation (collectively "domestic industry" or "Plaintiffs") submitted comments opposing the Remand Results. The Viraj Group submitted comments in support. The original determination under review is Stainless Steel Bar from India; Final Results of Antidumping Duty Administrative Review, 67 Fed.Reg. 45,956 (July 11, 2002) ("Final Results"), amended by 67 Fed.Reg. 53,336 (Aug. 15, 2002). The court has jurisdiction pursuant to 28 U.S.C. § 1581(c) (2000).

II. STANDARD OF REVIEW

The court "must sustain `any determination, finding or conclusion found' by Commerce unless it is `unsupported by substantial evidence on the record, or otherwise not in accordance with the law.'" Fujitsu General Ltd. v. United States, 88 F.3d 1034, 1038 (Fed.Cir.1996) (quoting 19 U.S.C. § 1516a(b)(1)(B)). Substantial evidence is "[m]ore than a mere scintilla;" it is "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Consol. Edison Co. of New York v. NLRB, 305 U.S. 197, 229, 59 S.Ct. 206, 83 L.Ed. 126 (1938); Matsushita Elec. Indus. Co. v. United States, 750 F.2d 927, 933 (Fed.Cir.1984). "In applying this standard, the court affirms [the agency's] factual determinations so long as they are reasonable and supported by the record as a whole, even if there is some evidence that detracts from the agency's conclusions." Olympia Indus., Inc. v. United States, 22 CIT 387, 389, 7 F.Supp.2d 997, 1000 (1998) (citing Atlantic Sugar, Ltd. v. United States, 744 F.2d 1556, 1563 (Fed.Cir.1984)). This court may not reweigh the evidence or substitute its own judgment for that of the agency. See Granges Metallverken AB v. United States, 13 CIT 471, 474, 716 F.Supp. 17, 21 (1989). Additionally, "absent a showing to the contrary, [the agency] is presumed to have considered all of the evidence in the record." Nat'l Ass'n of Mirror Mfrs. v. United States, 12 CIT 771, 779, 696 F.Supp. 642, 648 (1988). The court's inquiry is essentially into the reasonableness of the agency's determinations.

III. DISCUSSION

In order to collapse companies for the purpose of calculating dumping margins, Commerce must first determine that the companies are "affiliated" under 19 U.S.C. § 1677(33) (2000). Commerce must next determine that the companies "have production facilities for similar or identical products that would not require substantial retooling of either facility in order to restructure manufacturing priorities," and that "there is a significant potential for the manipulation of price or production." 19 C.F.R. § 351.401(f)(1).2 This appeal pertains only to the "substantial retooling" prong of the regulation.

In Slater I, the court found Commerce's decision to collapse the Viraj Group companies unsupported by substantial evidence and ordered Commerce "to reconsider its analysis of the collapsing issue and, if necessary, to revise its dumping margin calculations in accordance with this opinion." Slater I at 1372. In addition, the court found Commerce's articulated reasons in support of its decision "inadequate." Id. at 1378. Focusing on Commerce's evaluation of the companies' production facilities, the court questioned whether the record indicates that the production facilities of the Viraj Group companies were complementary, rather than overlapping, and whether, therefore, "substantial retooling" would be required to bring the companies' production facilities on par with one another. See id. at 1376-79.

The record indicates the following production capabilities for the Viraj Group companies. VAL has the capability to produce steel billets and black bar (hot-rolled). See Remand Results at 8. VIL has the capability to further process the black bar into bright bar (cold-finished bar). See id. at 9. VIL cannot produce black bar on its own. Further, "VFL's primary production operation relates to producing stainless steel flanges." Id. at 10. VFL "has production facilities similar to those of VIL," but unlike VAL. Id. After remand, the question remains whether "substantial retooling" of their production facilities would not be required for these companies to divert production of subject merchandise from one another to take advantage of dumping margin differentials.

This case highlights the degree of confusion pertaining to the interpretation of the collapsing regulation, and the incongruity manifested in applying the regulation to the facts at hand. After due deliberation, the court finds that the Remand Results fall short of satisfying its order in Slater I because the Remand Results do not follow the collapsing regulation, and because Commerce did not provide the court with adequate factual support and justification in support of its decision to collapse the Viraj Group companies. The court once again remands the case to Commerce to reevaluate its collapsing decision, and specifically address and answer the questions that are raised in this opinion under separate subheadings.

A. Commerce must explain why it did not analyze the "substantial retooling" prong of the collapsing regulation separately from the "manipulation" prong in this case.

As urged by the domestic industry, see Pls.' Comments at 11-12, section 351.401(f)(1) has two distinct and separate parts, the "substantial retooling" and "manipulation" prongs, which are joined by the word "and." Because the regulation is conjunctive, each element has to be met. While the Remand Results contain sufficient evidence in support of the government's affirmative determination on the "manipulation" issue, the Remand Results do not provide sufficient evidence and analysis of "substantial retooling." The evidence Commerce cites in support of its decision to collapse all bear on the question of "manipulation." That evidence, however, is irrelevant in the analysis of "substantial retooling." The issue in this appeal (as it was in Slater I) is "substantial retooling." The Remand Results do not sufficiently address (and in fact distract from) the examination of the companies' production facilities, which is the proper analysis of the "substantial retooling" question.

The government attempts to bring into its "substantial retooling" analysis the "manipulation" prong of the collapsing regulation by emphasizing that "the policy rationale of the collapsing regulation is to prevent affiliated companies with the same or similar production capabilities from manipulating price or production activities of subject merchandise to the affiliated company with the lowest margin, and thereby circumventing the antidumping law." Remand Results at 5 (citing and paraphrasing Slater I at 1376 in a misleading manner)3 (emphasis added). The government justifies its approach by arguing that "the central question of the collapsing regulation" is the price or production "manipulation" issue. Remand Results at 6 (citing Queen's Flowers de Colombia v. United States, 21 CIT 968, 979, 981 F.Supp. 617, 628 (1997)) & at 11 (citing Antidumping Duties; Countervailing Duties, 62 Fed.Reg. 27, 296, 27,346 (May 19, 1997) ("Preamble")).

In making the "manipulation" issue the "central question" in this appeal, Commerce lists a number of factors that need to be examined with respect to the "manipulation" issue pursuant to 19 C.F.R. § 351.401(f)(2). For example, Commerce points out that the Viraj Group companies "are sufficiently intertwined and have similar production capabilities." Id. at 6. Commerce reiterates that "the Viraj Group is a large, integrated, multinational entity in which two individuals hold the majority of shares, either directly or, along with friends and relatives and their promoted companies." Id. at 11 (quoting Viraj Group's June 29 and November 26, 2001 questionnaire responses) (internal quotation marks omitted). Further, "[t]hese same two individuals are also the managing directors of all three affiliates;" "[t]he selling and production activities for bar during the period of review at VIL and VAL are controlled by these directors;" "[t]...

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